infolinks

Monday, October 20, 2014

Mark Mobius: Pick stocks on dividend yield


Mark Mobius, Chairman of  Franklin Templeton has some insight into investing in Bursamalaysia. I am pasting his comments below for my reference and freely share others:-

"Investing in stocks that pay good dividends is the best strategy for investors in the short term as the FBM KLCI is overvalued in price-earnings ratio (PER) terms compared with other Asian indices, said Templeton Emerging Markets group executive chairman Dr Mark Mobius.
Yesterday, the KLCI closed at 1,803.14 points, with a PER of 16.38 times. On the other hand, Singapore’s Straits Times Index ended the day with a PER of 13.27 times while the Hang Seng Index closed with a PER of 10.05 times.
“It’s not a good idea to make short-term decisions in the market. Look at individual stocks in Malaysia to determine what the growth rates are going to be and what the valuations are now. At this stage, there are a number of stocks that you can buy, but I wouldn’t rush in.
“You have to look for cheaper stocks, those that have good growth but a relatively low PER and [good] yields. At this stage there are a number of very attractive high-yielding stocks, where the yields range from 5% to 7%,” Mobius told reporters after a luncheon talk yesterday.
He said stocks such as British American Tobacco (M) Bhd ( Financial Dashboard), Guinness Anchor Bhd (Financial Dashboard), Carlsberg Brewery (M) Bhd ( Financial Dashboard) and banking stocks are of particular interest, as those traditionally reward shareholders well.
“I’m very interested in banks, in particular. Because they reflect the growth of the country they are in. They [are] more diversified and less volatile as a result, and you get a nice dividend yield,” Mobius said.
He is also interested in the pharmaceutical and medical care industries as they are “high-growth industries”, while he considers the property sector in  Malaysia as one of the best markets for foreign investment.
“Property companies here look quite interesting, particularly those that are in a diversified portfolio,” Mobius said.
In his presentation earlier, Mobius said while property prices in Malaysia are rising, the number of non-performing loans and mortgages is declining, demonstrating the buying ability of Malaysians compared with other countries in the region.
“Thailand, Indonesia and [the] Philippines have a higher rate of non-performing loans. So from that point of view, it’s (Malaysian property) clearly affordable and if you look at house prices in relation to income, Malaysia is right there at the bottom,” he said.
On Malaysia as an investment destination, Mobius said tax rates for investors and predictability are the determining factors for foreign direct investments (FDIs).
“One of the things that hurt Malaysia a lot during the Asian financial crisis was when it stopped money going out. That created a lot of angst among foreign investors. It is very important to create a sense of confidence that there will be some predictability in the rule of law,” he said.
However, Mobius said factors like the undervalued ringgit, high-yielding stocks, the government’s programme to open up the market and efforts to integrate with other Asean markets also contribute to attracting FDIs.
On how the KLCI would end the year, he said the index should close higher — barring major crises — but did not specify a target.
“The trend is definitely moving upwards despite the valuations because there is room to accommodate high PER since the interest rates are so low,” he added."

This article first appeared in The Edge Financial Daily, on October 21, 2014.

Thursday, October 16, 2014

Six reasons why stock markets are tumbling

What has caused share prices to fall 10 per cent in a month?

More than £46 billion was wiped off the stock market on Wednesday as fears over the health of the global economy caused the biggest dip in share prices for almost a year and a half.
In a blow to savers, the FTSE 100 fell 181 points, 2.8 per cent, to just 6212 - its lowest since the summer of 2013. Financial markets around the world experienced a similar plight. The market recovered slightly on Thursday morning, but is still almost 10 per cent down on its 6880 peak in early September.
Here, in no particular order, are some of the reasons...

1 Greece

There are fears over the stability of the Greek government and its bail-out plans. David Madden, an analyst at IG, said: "It looks like we are entering another phase of the eurozone debt crisis." Greek share prices on Wednesday fell to their lowest level in 2014 as the country headed for an early election. A radical left opposition to the Greek government appears to be gaining momentum, opinion polls suggest.

2 America

The world's biggest economy looks weaker than it did a few months ago. Poor retail figures and a slowdown in manufacturing have put it on the back foot. US retail sales declined 0.3 per cent in September, marking the first fall in seven months.
The Federal Reserve, America's central bank, may now have to wait longer to raise interest rates. The outlook for America, China and Germany tends to set the pace for global share prices, which have become closely aligned due to globalisation.

3 Ebola

Crises make investors nervous. And nervousness leads to selling shares. Ebola has killed about 4,500 people so far, mostly in Liberia, Guinea and Sierra Leone. This week, it was revealed that a second American nurse has contracted the virus. The disease is spreading, experts said. Anthony Banbury of the UN said: "It is running faster than us, and it is winning the race."

4 Europe

The eurozone could feasibly slip back into recession, analysts have said. And it's not just Greece where there are concerns. Germany, the eurozone's biggest economy, has reported a fall in exports and slashed growth forecasts. Prospects across the Continent had "gone from bad to worse", according to City analysts Capital Economics, which downgraded its growth prediction for the year from 1 per cent to 0.7 per cent.

5 General nervousness

Jitters, they call it. Panic "gripped the market", according to one commentator in the Financial Times. Worries are often caused by global threats to health and security. One example is Ebola, but there are many around at the moment – for example, the geopolitical tensions in Syria, Iraq, Hong Kong and Ukraine. As these situations remain unresolved, traders anticipate difficulties for global companies that rely on exports and imports, as trade is disrupted. Jim Reid of Deutsche Bank said: “We’ve had a steady increase in bad news over the last month and it’s got to a point now where the market is nervous enough that incremental bad news is the straw that breaks the camel’s back.”

6 Deflation threat

Deflation is bad news, generally speaking, for economic growth and so investors are watching with apprehension. Inflation figures have fallen in many parts of the world. In the UK for instance, consumer prices index (CPI) inflation is now just 1.2 per cent – a five-year low.
What is meant by deflation? Essentially, it means that the buyers of goods and services don't trust the price in the shop window; they expect it to be lower next week. For example, someone might put off buying a car for £10,000 thinking that next week it will be £9,900. When the next week arrives, the person delays the purchase again, thinking the price will fall to £9,800 in a few days. And so on.
Ben Yearsley of stockbrokers Charles Stanley said: "The global economy does appear to be under threat, particularly from deflation in Europe, where prices have started to fall, and this could be contagious for the UK."

Tuesday, October 14, 2014

Warren Buffett Tells You How to Handle a Market Crash

Are you starting to panic? Heed the advice of the Oracle of Omaha.

Warren Buffett has never been shy about packing lessons for successful investing into his annual letter to shareholders. That letter is a treasure-trove of insight, presented in a folksy manner that is not only easy to read but incredibly entertaining.
With the market tumbling we’re all likely in need of a few doses of Warren’s unpretentious advice, so I dug through his past shareholder letters to find some gems that may help us navigate the current market drop and build a bigger nest egg for retirement.

1. “It’s better to have a partial interest in the Hope diamond than to own all of a rhinestone,” wrote Buffett in 2013.

Buffett is always hunting for great companies that he can buy for Berkshire Hathaway shareholders, but if he can’t buy the whole company, he’s OK with owning a smaller piece of it instead. Applying this advice to our own investments means spending less time considering how many shares of a company we can buy and more time figuring out where we believe the company will be in ten years. Doing that will help us avoid the pitfall of foregoing investments in great companies like Amazon AMZN 0.4536% ) or Priceline PCLN 0.6803% when they’re on sale to buy lower quality companies with smaller share prices.

2. “A ‘normal year,’ of course, is not something that either Charlie Munger, Vice Chairman of Berkshire and my partner, or I can define with anything like precision,” wrote Buffet in 2010.


Sure, the average annual return for the S&P 500 has been 8.14% over the past decade, but assuming that will be our return this year, next year, or any year is folly. Returns are volatile and will continue to be volatile, so we should focus less on the returns for any one period of time and instead focus on buying great companies and socking them away. Consider this point: While the S&P 500 has experienced plenty of fits-and-starts over the past 10 years, those who have owned it all along are up 103%.

3. “Long ago, Charlie laid out his strongest ambition: ‘All I want to know is where I’m going to die, so I’ll never go there,'” wrote Buffett in 2009.


Buffett avoids businesses whose future he can’t evaluate. Instead, he focuses on finding businesses that offer a predictable profit for decades to come. Taking the long-haul approach to finding great companies goes far beyond identifying the next big thing — after all, during the Internet boom there were plenty of Internet companies that soared on expectations rather than profit, and many of those companies have since gone bankrupt. Instead, we should be investing in companies we can understand that are likely to remain winners.

4. “We will never become dependent on the kindness of strangers. Too-big-to-fail is not a fallback,” wrote Buffett in 2009.


Warren’s cash stockpile is a thing of legend, and while that cash hoard holds back his returns in periods of growth, it also protects him when markets turn sour. Importantly, it also gives him the financial flexibility to take action and buy when prices are right. That plan-ahead mentality is something every investor can embrace by making sure there’s always some dry-powder around to deploy during the market’s inevitable declines.

5. “We would rather suffer the visible costs of a few bad decisions than incur the many invisible costs that come from decisions made too slowly — or not at all — because of a stifling bureaucracy,” wrote Buffett in 2009.

Buffett doesn’t hesitant when he’s presented with an idea that hits the mark. He recognizes that he won’t be right every time, but he also believes that taking action is critical to realizing the potential of an opportunity. As investors, we can emulate Buffett’s approach by making sure that once we’ve done our due diligence and picked our favorite investments we take action and buy, regardless of the market’s short-term machinations.

6. “Unlike many business buyers, Berkshire has no ‘exit strategy.’ We buy to keep. We do, though, have an entrance strategy, looking for businesses in this country or abroad…available at a price that will produce a reasonable return. If you have a business that fits, give me a call. Like a hopeful teenage girl, I’ll be waiting by the phone,” wrote Buffett in 2005.

Buffett keeps strictly to his investment discipline, but he also keeps an open mind to great ideas that fit into his strategy. Those ideas can come from various places. His acquisition of Clayton Homes, for example, was sparked by an autobiography of Clayton’s founder Jim Clayton which had been given to him as a gift by some University of Tennessee students. Keeping open to opportunities, regardless of their origin, may help us find worthwhile investments for the long term, too.

7. “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful,” wrote Buffett in 2004.

Buffett knows that emotion is a dangerous weapon that, if used incorrectly, can result in significant loss — and, if used correctly, can result in significant gain. Emotional reactions to surging or descending markets can make people buy when they should sell and sell when they should buy. Buffett often compares taking advantage of market slides to shopping for groceries. Last week on CNBC he summed it up by saying, “If you’re buying groceries, you like it when prices go down next week. And you like it if they go down further the next week.” Just as we like getting a good deal on the items at the grocery store we would be buying anyway, we should also be fans of getting a good deal on our favorite companies.

Following in Buffett’s footsteps

Buffett has no idea whether he’ll outperform the S&P 500 over the next year, but he does know that Berkshire Hathaway’s book value has grown a compounded annual 19.7% over the past 49 years. Similarly, we don’t know if our investments will outperform the market daily, weekly, or yearly, either. What we can feel pretty good about is the knowledge that investing in great companies like Coca Cola KO -1.0438% and Wells Fargo WFC -3.2271% — two companies that are long-standing Buffett holdings — may help put us on a path to a less-worrisome retirement.

Goldman Sachs has three rules for investing success in this volatile market

How bad was last week for the markets? The extreme volatility, which ended with the  S&P and Nasdaq recording their worst weekly declines in two years, was bad enough that even Goldman Sachs Group said its investors were dazed and confused in a note Monday. One investor even said it felt like he had whiplash.
Here are four factors driving the market’s moves right now.

1. Global growth clouds: The U.S. is expanding above trend, but China is slowing, and Europe is barely growing.
2. Dollar strength: The euro is expected to achieve parity by 2017.
3. The bear market for crude: The price of crude has fallen more than 20% since June.
4. Small caps notch dismal returns: The Russell 2000 RUT is down 13% off its peak and is underperforming the S&P 500 SPX .
Funds are also lagging the market, with 85% of large-cap mutual funds reporting that they’re below their benchmarks year-to-date, and your average hedge fund was up about 1% versus 5% for the S&P 500.
But Goldman GS  has a plan for how to invest in this uncertain market.
Focus on ‘American economic exceptionalism.‘ In layman’s terms, this means forecasts for stronger U.S. growth (Goldman economists expect 3.2% in 2015, which would be the fastest rate of expansion since 2005) will benefit companies with  greater domestic sales than foreign sales.
Invest in sectors that benefit from lower oil prices: Without a rebound in oil prices, energy equities will continue to lag. But lower oil will aid companies that provide consumer staples and discretionary products as input costs fall and personal consumption begins to rise. Chemical companies and airlines also will see reduced costs. Overweight industrials and consumer discretionary, advises Goldman. See: Split between OPEC producers deepens
Stick with U.S. large caps: A rising dollar and positive U.S. growth typically correspond with the Russell 2000′s outperformance, but negative earnings have driven small-caps lower. This may be due to the fact that investors are biased toward the relative safety of large-caps. This is depicted in the chart below, which shows how small-caps have underperformed as the yield curve has flattened. Some view aflattening yield curve as a leading indicator of recession.
Here are 10 stocks that meet these criteria, according to Goldman.
  1. Goodyear Tire & Rubber GT  (consumer discretionary)
  2. General Motors GM  (consumer discretionary)
  3. Tyson Foods TSN  (consumer staples)
  4. CVS Health CVS  (consumer staples)
  5. Pioneer Natural Resources PXD  (energy)
  6. J.P. Morgan Chase JPM  (financials)
  7. Bank of America BAC  (financials)
  8. Tenet Healthcare THC  (healthcare)
  9. Delta Air Lines DAL  (industrials)
  10. Salesforce.com CRM  (information technology)

Opinion: This is the most dangerous stock market since 2008

Volatility has returned to the market. To be specific, the market has rallied, sold off, rallied, and sold off, all in one week. This is ideal for day traders but unnerving for individual investors. It is also a big red warning sign.
To refresh your memory, last week every rally failed, so the market ended the week on its lows. Even the October 8th rally of 274 points reversed direction the next day. It was a monster rally based on the FOMC minutes, which revealed member’s concern for global growth. Got that? The market rallied on bad news. In the mixed-up world of Wall Street, that meant interest rates would remain low. Unfortunately for the bulls, the next day the market fell by 334 points. That’s volatility!
In nontechnical terms, the October 8th manic rally was a head fake. It might have cheered amateur investors, but in reality, this has become one of the most dangerous markets since 2008.
Poll: Investor confidence at eight-year high
A new survey says that while sentiment among investors toward stocks is high, global instability is raising significant caution flags. Cindy Fornelli of CAQ joins MoneyBeat. Photo: Getty.
Facts are hard to dispute but easy to spin. Already, the Russell 2000 RUT, -0.38%  is in a 10% correction. Judging by history, the Dow Jones Industrial AverageDJIA, -1.35%  and S&P 500 SPX, -1.65%  shouldn’t be far behind. A major correction or crash would be definitive proof this market is wearing no clothes.
Failed rallies
Failed rallies are extremely significant. Previously, whenever there were major or minor selloffs, buy-on-the-dippers would come in and change the market’s direction. On a chart, you’d see a distinctive “V” pattern as buyers overwhelmed sellers. This pattern has continued for months — until recently.
‘When fear does hit the market, there will be a mad rush out the door that will remind investors of 2008.’
On the market’s worst days, the Fed would conveniently appear with a new QE program or a promise to keep interest rates low for a considerable time (that’s getting old). Soon, though, these bandages will not work. Failed rallies mean the party is almost over and a bear market is getting closer (and may even have arrived).
In addition to failed rallies, look for more intraday reversals (from a rally to a selloff), and a strong selloff into the close. For years, no matter how bad the news, it was either forgotten by the next day or spun as positive. As the bull market comes to an end, the market will finally react negatively to bad news.
Sell into rallies
Lately, there has been a tug-of-war between the bulls and bears. For the most part, the bears have been winning. If that pattern continues, many traders will sell on the rallies instead of buying on the dip. If selling on the rallies continues to work, that’s further evidence this bull market is on its last legs.
TimeDow Jones Industrial Average14 Jul28 Jul11 Aug25 Aug8 Sep22 Sep6 Oct
US:DJIA
16,50017,00017,50016,000
The bulls are going to have to work hard for their money this year, something they are not accustomed to. And the bears will still have to manage explosive one-day rallies. This is what makes this market so dangerous.
It takes a long time for sentiment to change from overconfidence to fear, and right now we’re in the early stages. The recent volatility has upset investors, but there is still little fear. When fear does hit the market, there will be a mad rush out the door that will remind investors of 2008.
At the moment, it’s too early to proclaim that a bear market has definitely begun. Keep in mind that bull markets do not end in a week, as topping out can take time. In addition, bear markets often begin slowly and secretly, and arrive before most investors realize it. I’m convinced we’re close to the end of the topping-out process, but we still need more evidence. The increase in volatility VIX, +16.01%  is a significant clue.
There are other clues. For example, New Highs-New Lows have been flashing warning signs for weeks, and the NYSE Advance-Decline line topped out in late August. Although no one can time a market top, these indicators should not be ignored. In fact, judging by the technical, fundamental, and sentiment indicators, crunch time is getting closer.
Be prepared to take defensive action
Remember, Mr. Market always has the last word. My advice to investors: Buying on the dips could be highly dangerous. Review your portfolio and take defensive actions to protect it. This includes buying put options or hedging with ETFs if you are experienced. If you’re not, consider selling a portion of your stock portfolio.
Bottom line: Some believe the long-anticipated correction has finally arrived. My view is that it could be worse — the end of the bull market. Take action before too much damage is done to your portfolio. The last thing you want is to try to get out when everybody else is selling.

Monday, October 13, 2014

Warning: Stocks Will Collapse by 50% Sunday, 12 Oct 2014 08:18 AM

It is only a matter of time before the stock market plunges by 50% or more, according to several reputable experts.

“We have no right to be surprised by a severe and imminent stock market crash,” explains Mark Spitznagel, a hedge fund manager who is notorious for his hugely profitable billion-dollar bet on the 2008 crisis. “In fact, we must absolutely expect it."

Unfortunately Spitznagel isn’t alone.

“We are in a gigantic financial asset bubble,” warns Swiss adviser and fund manager Marc Faber. “It could burst any day.” 

Faber doesn’t hesitate to put the blame squarely on President Obama’s big-government policies and the Federal Reserve’s risky low-rate policies, which, he says, “penalize the income earners, the savers who save, your parents — why should your parents be forced to speculate in stocks and in real estate and everything under the sun?”

Billion-dollar investor Warren Buffett is rumored to be preparing for a crash as well. The “Warren Buffett Indicator,” also known as the “Total Market Cap to GDP Ratio,” is breaching sell-alert status and a collapse may happen at any moment. 

So with an inevitable crash looming, what are Main Street investors to do? One option is to sell all your stocks and stuff your money under the mattress, and another option is to risk everything and ride out the storm.

But according to Michael Carr, director of Absolute Profits, there is a third option.

“There are specific sectors of the market that are all but guaranteed to perform well during the next few months,” Carr explains. “Getting out of stocks now could be costly.”

How can Carr be so sure?

He has access to a secret Wall Street calendar that has beaten the overall market by 250% since 1968. This calendar simply lists 19 investments (based on sectors of the market) and 38 dates to buy and sell them, and by doing so, one could turn $1,000 into as much as $178,000 in a 20-year time frame.

“But this calendar is just one part of my investment system,” Carr adds. “I have also designed a Crash Alert System that is designed to warn investors before a major correction as well.”

During the Cold War, Carr coded nuclear missile flight patterns for the U.S. Air Force to help protect millions of lives. His coding had to be 100% correct. Now he brings this coding ability to the stock market to help protect millions of investors. 

Carr explains that if the market starts to plunge, the Crash Alert System will signal a sell signal warning investors to go to cash.

“You would have been able to completely avoid the 2000 and 2008 collapses if you were using this system based on our back-testing,” Carr explains. “Imagine how much more money you would have if you had avoided those horrific sell-offs.”

One might think Carr is being too confident, but he has proven himself correct in front of millions of people time and time again. 

In a November 2013 panel interview on Fox Business, Carr made three different predictions about the stock market. First, he predicted the stock market would rise 5% over the next 45 days. He was correct.

Then, he said oil would rally. It too, followed his exact predictions.

Finally, Carr provided his top stock pick . . . which then rallied 110%.

“A lot of people think I am lucky,” Carr said. “But it has nothing to do with luck. It has everything to do with certain tools I use. Tools like the secret Wall Street calendar and my Crash Alert System.”

With more financial uncertainty than ever, thousands of people are flocking to Carr for his guidance. He has over 114,000 subscribers to his monthly newsletter, and his investment videos have been seen millions of times.

In a recent video, Carr not only reveals the secret Wall Street calendar, he also shows how his Crash Alert System works so that anybody can follow in his footsteps